YOUR COMPANY IS LOOKING FOR A BUSINESS LOAN!
WORKING CAPITAL LOANS / BUSINESS FUNDING
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
Canadian chartered banks, usually by virtue of their ‘relationship’ with business owners and entrepreneurs are in a position to pass on valuable financing tips and information on business loans and working capital financing options for start-up or smaller firms. Although the banks are a solid source of such information the banks themselves, by virtue of their charters and credit policies, are unable to directly satisfy the financing needs of the customer.
SELF FINANCE ? OR A GOVERNMENT OF CANADA SMALL BUSINESS LOAN
Business owners are often therefore encouraged by banks to ‘self-finance ‘the venture via equity or owner capital and commitment. It is clearly a misconception that banks play a key and major role in the financing of new ventures. Possibly the only exception to this statement is the fact that the banks offer up, in their role as administrators, the Government Small Business Loan, which is a Canadian federal government program providing loans up to, in some cases 1,000.000.00$ for purchase of real estate, business assets, or leasehold improvements. (The more typical loan amount maximum is 350,000.00$) Repayment terms under the Canada Small Business Financing Program are flexible and the program is clearly the most popular in the ' small business loans' category in Canada.
BANK FINANCE PARTICIPATION IN THE SME ECONOMY
We may or may not agree with Canadian banking policies on start-up and young venture financing, we should however appreciate the bank's stance – they are lending out our capital at very low rates, with the potential to lose the entire investment if your firm can’t repay loans and financing.
ASSESSING WHAT STAGE OF GROWTH YOUR COMPANY IS IN
How can small or newer businesses succeed in financing options in their working capital needs ? Businesses of the size that we are discussing need thousands, literally millions of dollars of financing to fuel their growth in Canada. In our commentary that we are providing it is important to note that as companies develop along the ‘stage of development ‘timeline they, of course, have much more access to the traditional bank and private equity financing.
We are primarily talking about earlier stage companies, who may be still developing products and services and may not be yet profitable as they start delivering and billing for those products and services, nevertheless still needing working capital loan financing of some sort in the short term.
So what are the immediate challenges of firms that are unable to provide traditional financing and what are, more importantly, some immediate solutions?! The challenge is all about asset turnover in current assets such as accounts receivable and inventory and ensuring you can finance those two critical assets of your business. Managing current liabilities such as account payables is key to maintaining good relations with suppliers and vendors. Management must have a constant ' need to know ' in order to anticipate negative working capital positions.
HERE ARE BANK FINANCING CHALLENGES THE BUSINESS OWNER FACES
The challenges tend to be painfully obvious to the Canadian business owner or financial manager that has worked to get traditional bank and equity financing. They are as follows:
Perceived industry or product risk
No collateral
Uncertain financial projections
Limited Performance history
Funding Short term working capital
How can the Canadian business entrepreneur overcome these very traditional roadblocks and challenges? There are a number of ways.
SUMMARY OF TRADITIONAL AND ALTERNATIVE FINANCING SOLUTIONS - WHICH ONE WORKS FOR YOU?
First of all, all alternative methods of financing should be pursuing. Alternative financing methods are most non-dependent on the above-noted risks and challenges.
Those alternative methods of financing might include:
A/R Financing - Invoice financing for unpaid invoices
Inventory Loans
Access to Canadian bank credit / lines of credit
Non-bank asset-based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Purchase Order Financing
Short Term Working Capital Loans/ Merchant Advance A personal credit score is important
Securitization
CONCLUSION
In summary, newer or smaller firms fall into the ‘ void ‘ area of financing, where very few traditional financing strategies can be implemented, at a time when cash flow and working capital are most critical and access to lines of credit and funding is critical. Business owners of small businesses find themselves on a continuous treadmill of cash flow needs.
Looking for help in the type of loan and business credit solution you need? Small business owners should review non-alternative strategies that can be of great assistance in early growth periods and take advantage of financing to capitalize on business opportunities. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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